11.Segment Information

Our reportable segments reflect the significant components of our operations where discrete financial information is evaluated separately by our chief operating decision maker (“CODM”). We organize our segments based primarily upon the nature of the underlying products and services, as well as the drivers of profitability growth. The net income for each reportable segment included in the tables below are in conformity with GAAP and our significant accounting policies as denoted in Note 2. The amounts not attributable to reportable segments are aggregated under “other items not allocated to segments.”

Following is a description of and basis for presentation for each of our reportable segments.

Self-Storage Operations

The Self-Storage Operations segment reflects the rental operations from all self-storage facilities we own. Our CODM reviews the net operating income (“NOI”) of this segment, which represents the related revenues less cost of operations (prior to depreciation expense), in assessing performance and making resource allocation decisions. The presentation in the tables below sets forth the NOI of this segment, as well as the depreciation expense for this segment, which while reviewed by our CODM and included in net income, is not considered by the CODM in assessing performance and decision making. For all periods presented, substantially all of our real estate facilities, goodwill and other intangible assets, other assets, and accrued and other liabilities are associated with the Self-Storage Operations segment.

Ancillary Operations

The Ancillary Operations segment reflects the sale of merchandise and reinsurance of policies against losses to goods stored by our self-storage tenants, activities which are incidental to our primary self-storage rental activities. Our CODM reviews the NOI of these operations in assessing performance and making resource allocation decisions.

Investment in PSB

This segment represents our 42% equity interest in PSB, a publicly-traded REIT that owns, operates, acquires and develops commercial properties, primarily multi-tenant flex, office, and industrial space. PSB has a separate management team that makes its financing, capital allocation, and other significant decisions. In making resource allocation decisions with respect to our investment in PSB, the CODM reviews PSB’s net income, which is detailed in PSB’s periodic filings with the SEC, and is included in Note 4. The segment presentation in the tables below includes our equity earnings from PSB.

Investment in Shurgard Europe

This segment represents our 49% equity interest in Shurgard Europe, which owns and operates self-storage facilities located in seven countries in Western Europe. Shurgard Europe has a separate management team reporting to our CODM and our joint venture partner. In making resource allocation decisions with respect to our investment in Shurgard Europe, the CODM reviews Shurgard Europe’s net income, which is detailed in Note 4. The segment presentation below includes our equity earnings from Shurgard Europe.

Presentation of Segment Information

The following tables reconcile NOI (as applicable) and net income of each segment to our consolidated net income (amounts in thousands):


Three months ended September 30, 2018

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	666,616	$	-	$	-	$	-	$	-	$	666,616
Ancillary operations		-		39,752		-		-		-		39,752
		666,616		39,752		-		-		-		706,368

Cost of operations:
Self-storage operations		183,637		-		-		-		-		183,637
Ancillary operations		-		11,907		-		-		-		11,907
		183,637		11,907		-		-		-		195,544

Net operating income:
Self-storage operations		482,979		-		-		-		-		482,979
Ancillary operations		-		27,845		-		-		-		27,845
		482,979		27,845		-		-		-		510,824

Other components of net income (loss):
Depreciation and amortization		(124,516)		-		-		-		-		(124,516)
General and administrative		-		-		-		-		(27,429)		(27,429)
Interest and other income		-		-		-		-		7,020		7,020
Interest expense		-		-		-		-		(8,094)		(8,094)
Equity in earnings of
unconsolidated real estate entities		-		-		13,008		4,763		-		17,771
Foreign currency exchange gain		-		-		-		-		2,612		2,612
Gain on sale of real estate		-		-		-		-		1,401		1,401
Net income (loss)	$	358,463	$	27,845	$	13,008	$	4,763	$	(24,490)	$	379,589


Three months ended September 30, 2017

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	646,238	$	-	$	-	$	-	$	-	$	646,238
Ancillary operations		-		40,123		-		-		-		40,123
		646,238		40,123		-		-		-		686,361

Cost of operations:
Self-storage operations		173,315		-		-		-		-		173,315
Ancillary operations		-		17,304		-		-		-		17,304
		173,315		17,304		-		-		-		190,619

Net operating income:
Self-storage operations		472,923		-		-		-		-		472,923
Ancillary operations		-		22,819		-		-		-		22,819
		472,923		22,819		-		-		-		495,742

Other components of net income (loss):
Depreciation and amortization		(113,320)		-		-		-		-		(113,320)
General and administrative		-		-		-		-		(22,311)		(22,311)
Interest and other income		-		-		-		-		4,569		4,569
Interest expense		-		-		-		-		(2,389)		(2,389)
Equity in earnings of
unconsolidated real estate entities		-		-		9,261		7,243		714		17,218
Foreign currency exchange loss		-		-		-		-		(13,446)		(13,446)
Casualty loss		-		-		-		-		(7,789)		(7,789)
Net income (loss)	$	359,603	$	22,819	$	9,261	$	7,243	$	(40,652)	$	358,274


Nine months ended September 30, 2018

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	1,943,359	$	-	$	-	$	-	$	-	$	1,943,359
Ancillary operations		-		118,461		-		-		-		118,461
		1,943,359		118,461		-		-		-		2,061,820

Cost of operations:
Self-storage operations		545,700		-		-		-		-		545,700
Ancillary operations		-		33,648		-		-		-		33,648
		545,700		33,648		-		-		-		579,348

Net operating income:
Self-storage operations		1,397,659		-		-		-		-		1,397,659
Ancillary operations		-		84,813		-		-		-		84,813
		1,397,659		84,813		-		-		-		1,482,472

Other components of net income (loss):
Depreciation and amortization		(362,272)		-		-		-		-		(362,272)
General and administrative		-		-		-		-		(90,278)		(90,278)
Interest and other income		-		-		-		-		18,892		18,892
Interest expense		-		-		-		-		(24,589)		(24,589)
Equity in earnings of
unconsolidated real estate entities		-		-		73,451		17,078		-		90,529
Foreign currency exchange gain		-		-		-		-		12,738		12,738
Gain on sale of real estate		-		-		-		-		1,825		1,825
Net income (loss)	$	1,035,387	$	84,813	$	73,451	$	17,078	$	(81,412)	$	1,129,317


Nine months ended September 30, 2017

	Self-Storage Operations		Ancillary Operations		Investment in PSB		Investment in Shurgard Europe		Other Items Not Allocated to Segments		Total
	(Amounts in thousands)
Revenues:
Self-storage operations	$	1,878,215	$	-	$	-	$	-	$	-	$	1,878,215
Ancillary operations		-		118,005		-		-		-		118,005
		1,878,215		118,005		-		-		-		1,996,220

Cost of operations:
Self-storage operations		516,488		-		-		-		-		516,488
Ancillary operations		-		39,611		-		-		-		39,611
		516,488		39,611		-		-		-		556,099

Net operating income:
Self-storage operations		1,361,727		-		-		-		-		1,361,727
Ancillary operations		-		78,394		-		-		-		78,394
		1,361,727		78,394		-		-		-		1,440,121

Other components of net income (loss):
Depreciation and amortization		(334,426)		-		-		-		-		(334,426)
General and administrative		-		-		-		-		(62,331)		(62,331)
Interest and other income		-		-		-		-		12,722		12,722
Interest expense		-		-		-		-		(4,553)		(4,553)
Equity in earnings of
unconsolidated real estate entities		-		-		35,694		19,484		2,057		57,235
Foreign currency exchange loss		-		-		-		-		(44,452)		(44,452)
Casualty loss		-		-		-		-		(7,789)		(7,789)
Gain on sale of real estate		-		-		-		-		975		975
Net income (loss)	$	1,027,301	$	78,394	$	35,694	$	19,484	$	(103,371)	$	1,057,502